Morgan Stanley is aiming to become a top three broker in Australia, after surpassing the likes of Goldman Sachs, JPMorgan and Bank of America Merrill Lynch to muscle into the top five in March.

Morgan Stanley’s head of institutional equities,
Ian Chambers
, attributes the broker’s slow and steady ascent to its organic growth strategy – distinct from the growth-by-acquisition model employed by many of its global peers. The broker has had 7 per cent of the equity market for the year to date. This equates to just over $41 billion worth of trades.

“In Australia I would observe that many of the acquisitions made by major equity firms have not resulted in a positive return outcome, and some unwound over time," Mr Chambers said.

“Naturally, one of the concerns I have about growing through acquisition is the goodwill component primarily around people and technology.

AFR
AFR

“If the acquired technology isn’t globally compatible then it’s of little value and you also face the potential prospect of key staff acquired departing," he said.

Mr Chambers highlighted talent scouting as critical to the broker’s success. This included the poaching of head of sales trading, Anthony Goonan, from Merrill Lynch and executive director Mark Fitzgerald from UBS.

“We’re fully evaluating our business and I think we’ve made the bulk of our critical hiring," Mr Chambers said.

“We want to continue to advance our business.

“Ultimately, we want to be seen as a top-three player in the market."

Mr Chambers is bullish on the United States economy and says Australian companies are set to benefit from a stronger global macro environment. “We would see a continued positive macro outlook driving top-line revenue growth which in turn will facilitate improved company earnings ."

He said Australian financial services companies looked expensive compared with global peers.

“But I must say those businesses over the past 20 years have achieved greater return on equity and dividend yields than their peers globally, so they deserve to be trading on those multiples," he said.

Mr Chambers said the “key dilemma" for the market was the resources sector and the outlook for commodities.

“We have experienced over the last decade a commodity cycle driven by China’s demand and by commodity deficits.

“We are now entering more challenging times driven by investment in supply that may change the pricing outlook on a more permanent basis."